Fortress Credit Corporation (Australia) Ii Pty Ltd v Fletcher & Barnet (as liquidators of Octaviar Administration Pty Ltd (in Liq)

Fortress Credit Corporation (Australia) II Pty Ltd appealed to the Court of Appeal of New South Wales against orders made by the primary judge approving an application by the joint liquidators of Octaviar Administration Pty Ltd (in Liq) for approval to enter into a litigation funding agreement. Fortress, a creditor of Octaviar, argued that the proposed litigation funding agreement would diminish the value of its debt and that it had standing to appeal the primary judge's decision.

The central legal issues before the Court of Appeal were whether Fortress had standing to appeal the primary judge's decision to grant approval for the litigation funding agreement, and if so, whether the primary judge had erred in the exercise of their discretion in approving the agreement. The Court was required to consider the principles governing the standing of non-parties to appeal court orders and the factors relevant to a liquidator's application for approval to enter into a litigation funding agreement under s 477(2B) of the *Corporations Act 2001* (Cth).

The Court of Appeal held that Fortress did have standing to appeal, as it was a creditor whose interests were directly affected by the proposed agreement, and the proceedings had the potential to diminish the value of its debt. On the substantive appeal, the Court found that the primary judge had misapplied the relevant principles and had not adequately considered all the factors necessary for the proper exercise of discretion under s 477(2B). Consequently, the Court allowed the appeal, set aside the primary judge's orders approving the litigation funding agreement, and remitted the matter back to the primary judge for further consideration. The respondents were ordered to pay Fortress's costs of the application for leave to appeal and the appeal.